Persistent Systems Ltd. share price target

Strong growth to continue, but attrition worrying Motilal Oswal values your support in the Asiamoney Brokers Poll 2021 for India Research, Sales, Corporate Access and...

PSYS reported stellar Q1FY22 numbers with dollar revenue growth of 9.1% QoQ (incl. Capiot) driven by BFSI and healthcare

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Background: Persistent Systems is one of the leading outsourced product development (OPD) companies in India. Revenue from business offering mix: Services (81.9%) & IP led business (18.1%). The company has industry expertise in ISV (41.7%), Enterprise (42%) and IP Led (16.3%). The company's business is spread across North America (81.1%), Europe (8.8%), and RoW (10.1%).Company earns revenue from global delivery centers (30.5%), India (51.4%) and IP Led (18.1%). Total active clients stood at 1000+ including services and IP led business. Company's top client accounts 18.5% in revenues, top 5 (37.8%) and top 10 (47%)....

Consistent expansion in EBIT margin +42 bps QoQ to 13.2% in 4QFY21 and +290 bps YoY to 12.1% in FY21. There is further scope for expansion in margins led by cost optimization and revenue acceleration Persistent has not only reported excellent performance in 4QFY21 (+4.6% QoQ USD) but also shown strong consistent revenue growth (+12.8% YoY USD) and margin expansion (+290 bps) throughout the year. Growth in 4QFY21 was led by strong growth in Services (+8.2% QoQ USD) which offset...

We were impressed by PSYS strong performance in 4QFY21 USD revenue growth of 4.6% QoQ (100bp above MOFLSe) and 16.9% EBITDA margin (down 10bp QoQ despite a one-month wage hike impact). Order bookings of USD246m (1.6x book-to-bill ratio) in 4QFY21 points to good growth visibility for FY22E, especially with management commentary that the TCV run-rate of over USD200m will result in a quarterly revenue growth of 4.5-5% in USD terms. PSYS has reported best-in-class growth in the TSU business (18.4% YoY)...

The company has won a total contractual value of US$246.5 million of which annual contractual value is US$200 million (implying a book to bill ratio of 1.3x) and net new of US$96.9 million. This, coupled with multi-year deal won by the company, will help improve its revenues growth (the company aspires to achieve 3.5-4% QoQ growth). The company has hired 1618 and 1173 in the past two quarters, respectively, with increasing large deal size representing robust growth opportunity in coming quarters. In addition, Persistent's focus on client mining, scaling up new clients, expanding...

Persistent Systems (PSYS) reported in-line Q4FY21 numbers, with dollar revenue growth at 4.6% QoQ.

We recommend a BUY and value the stock at 24x P/E to its FY23E earnings of Rs. 95.3/ share which gives a TP of Rs. 2,325/share, an upside of 14 from CMP.

Background: Persistent Systems is one of the leading outsourced product development (OPD) companies in India. Revenue from business offering mix: Services (81.9%) & IP led business (18.1%). The company has industry expertise in ISV (41.7%), Enterprise (42%) and IP Led (16.3%). The company's business is spread across North America (81.1%), Europe (8.8%), and RoW (10.1%).Company earns revenue from global delivery centers (30.5%), India (51.4%) and IP Led (18.1%). Total active clients stood at 1000+ including services and IP led business. Company's top client accounts 18.5% in revenues, top 5 (37.8%) and top 10 (47%)....